Sunday, July 17, 2011

Trade Adjustment Assistance program, (TAA)

The Trade Adjustment Assistance program, (TAA), is basically a relief and retraining program for workers who have lost their jobs for reasons traceable to foreign competition. It is implicitly an admission that trade liberalization has cost US workers jobs and that government owes something to those workers in compensation.

The conservative Heritage Foundation has been advocating letting TAA expire. Part of their case is a statistic that of all recent mass layoffs, (50 or more jobs), only about 1 percent is attributable to foreign competition. This neglects to count, as does TAA itself, loses by smaller firms which may not even have 50 employees to begin with and cases where firms are unable, or disinclined, to document that layoffs are due to foreign competition. Moreover, the major part of jobs lost is probably in the form new jobs created overseas rather than here.

Slightly better is the objection that the retraining is mostly ineffective. The foundation is able to cite studies showing that there is no improvement in the wage level of post-training replacement jobs over those that were lost, although the trainees do enjoy about a 10.2% advantage in their reemployment rate.

The foundation argues that "The government should not discriminate between workers who lose their jobs because of trade and workers who lose their jobs for other reasons." but then a bit inconsistently objects to a TAA benefit extending health coverage to retirees from bankrupt companies even if the bankruptcy has nothing, (provable), to do with trade.

Taken on the whole, the Heritage Foundation arguments are weak and mean-spirited. While trade liberalization is desirable long term it would be very justified to put new trade agreements on hold pending more favorable economic conditions and to meanwhile continue to compensate workers displaced from their jobs by agreements which have already been put in place too quickly and, with the small exception of TAA, carelessly.